February 28, 2024

DealBook: Chief Sells $25 Million in Shares of Jefferies

The chief executive of a Wall Street investment bank sold a large stake in his company to pay off a personal debt on Thursday, a move that frightened its shareholders during an already scary day in the markets.

Richard B. Handler, the head of the Jefferies Group — and the highest-paid chief executive of a major Wall Street bank last year — sold two million shares, or $25.2 million worth of stock, to the bank’s largest shareholder, according to a securities filing.

The news sent shares of Jefferies tumbling more than 11 percent, before they recovered. Shares closed at $12.37, falling 3.7 percent, roughly in line with the broader market.

Mr. Handler sent a short memo to his employees explaining his reason for the sale. The transaction was tied to “significant tax payments” that he owed because of recently vested Jefferies stock. He said he had previously taken on debt to pay the tax bill because, as chief executive, he had been blocked from selling shares.

“While I am not happy about reducing my interest in our firm,” Mr. Handler said, “being out of debt is the prudent thing for me and my family in a turbulent world.”

Mr. Handler sold his stock in a turbulent market. The Dow Jones industrial average dropped more than 500 points Thursday before closing down 391 points, or 3.5 percent.

It was also an unpropitious time to sell Jefferies stock. All financial services shares have been hard hit this year, but Jefferies has fallen more than most. Its stock has fallen more than 50 percent year to date, while the Standard Poor’s 500 stock-market index is down about 10 percent. Its shares fell sharply on Wednesday as analysts called the bank’s third-quarter results disappointing and cut its earnings estimates.

Goldman, in a research report, said it saw “continued downside” in the stock. The firm has a sell rating on the company.

Thomas Tarrant, a spokesman for Jefferies, declined to comment.

Chief executives rarely sell large chunks of stock, especially in down markets, because shareholders often consider it a vote of nonconfidence. In recent years, some executives have sold down their positions to assist in tax planning. Last year, Steven A. Ballmer, the chief executive of Microsoft, announced the sale of a portion of his holdings in part for tax reasons.

Still, Mr. Handler’s sale had Wall Street trading floors abuzz on Thursday. Mr. Handler, 50, is one of the highest paid chief executives not only in finance, but in the country. In 2010, he was granted total compensation valued at $47.3 million, which included a bonus for 2009 and stock awards for coming years. In contrast, Lloyd C. Blankfein, Goldman Sachs’s chief executive, made $13.2 million in 2010.

The sale also surprised the staff at Jefferies, which, like many Wall Street banks, is known for a staunch stock-ownership culture where sales of the company’s shares are frowned upon inside the bank.

Mr. Handler, who has been the chief executive for the last decade, is the largest individual shareholder in Jefferies and has not sold any of his stock since 2006. After his sale of two million shares, he still owns about 12 million shares, or 6 percent of the shares outstanding. Those shares are worth $148 million based on Thursday’s closing price.

Adding to the intrigue was the news that Mr. Handler had sold his shares to the Leucadia National Corporation, the bank’s largest shareholder. Leucadia, a low-profile conglomerate, owns about 26 percent of the company. Leucadia acquired Mr. Handler’s 2 million shares at $12.58 a share, approximately the market price.

“I think they made a great buy and am gratified by their belief in and support of Jefferies,” Mr. Handler said in his memo.

Jefferies, which is based in New York and specializes in trading debt and stocks, has expanded aggressively in recent years, in part taking advantage of some of the dislocation from the financial crisis. Mr. Handler, a charismatic leader, is a former trader at the investment bank Drexel Burnham Lambert, which collapsed in 1990 in the turmoil of the junk-bond market.

“I am sharing this personally with all of you so you are aware of the exact details so rumors or noise do not distort the facts,” Mr. Handler said.

Article source: http://feeds.nytimes.com/click.phdo?i=379280f04722d1d39d053966f5a5f210

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